Goldman Sachs' AI screen

WABAC

This caught my eye because I am always curious about what the smart money is up to. Here you go: https://finance.yahoo.com/news/goldman-sachs-stark-message-investors-203700678.html

Goldman's approach relies on two specific screens. The first is labor cost as a share of revenue.

Goldman's company-level metric estimates exposure to AI automation by analyzing job functions and overlaying them with task-level measures of AI capability, then combining that estimate with each firm's labor-cost-to-revenue ratio. Software, professional services, banks and media rank as the most at-risk sectors by this measure.

The second screen is physical asset density. Businesses anchored to factories, distribution networks or precision manufacturing equipment carry a natural moat. Those operations take years to replicate and no AI model can shortcut that timeline.

Together, the two measures separate genuinely durable businesses from those that look stable but carry real automation risk underneath.

I have been leaning towards industrials prior to this due to reshoring, or deglobalization as some style it. One reason I pulled the plug on PRWCX was its woeful underweight to industrials and materials. But shoot, I've always leaned value, and that's where you often find more industrials.

I don't know that I accept the screen at face value. Maybe that's because I don't understand how AI keeps banks from making money doing all of the things they already do.